PALEO O PAIR
Satellite TV biz being eclipsed
Satellite TV is dying more quickly than Wall Street thought.
Cheap streaming services from Netflix, Amazon, Hulu and YouTube are spurring surprisingly steep customer losses at Dish Network and DirecTV, the nation’s dominant satellite broadcasters.
Last week, shares of Dish, run by Charlie Ergen, tumbled 7.7 percent after the company revealed it lost 334,000 customers in the most recent quarter — a frightening figure that left the ranks of its satellite-TV subscribers below the 10 million mark for the first time in 15 years.
Two weeks earlier, DirecTV revealed its subscriber ranks plunged by 658,000 — nearly twice the 346,000 it bled a quarter earlier, sending shares of its owner, AT&T, plunging 4.3 percent.
By contrast, cable providers like Charter’s Spectrum lost 36,000 subscribers, Comcast dropped 19,000, and Verizon’s Fios shed 46,000.
The carnage renewed questions about AT&T boss Randall Stephenson’s 2015 decision to shell out $67 billion to buy DirecTV. While defenders say AT&T was buying a subscriber base and content deals, both arguments are looking increasingly thin — and analysts are getting more blunt about it.
DirecTV “found a greater fool to sell the asset to quickly — before its impending death was broadly known,” said Jonathan Chaplin, an analyst at New Street Research.
Indeed, at a November presentation to analysts, Stephenson admitted AT&T was “scrambling” to amp up its streaming-video business because it was “seeing shifts in viewing from traditional TV viewing — cable, satellite — to on-demand viewing.”
“For satellite operators, losing subscriptions is catastrophic,” said Craig Moffett, an analyst at Moffett-Nathanson. “These businesses have high fixed costs and their margins will spiral down as they lose subscribers.”
AT&T will likely take an “enormous write-down” on DirecTV, whereas the debtladen Dish will likely file for bankruptcy in the coming years, he said.
Neither has been helping the situation by jacking up prices. Last month, Dish hiked its basic package by more than 10 percent, to $52.99 a month. Also in January, the price of the standard DirecTV Choice increased more than 12 percent, to $45 a month.
Netflix, by comparison, recently hiked its monthly price to $12.99 a month.
“It’s going to be death by a thousand paper cuts,” said Chris Wagner, managing partner at OTT Advisors. “The arrival of 5G [wireless broadband] networks — with speeds up to 100 times greater than they are now — will give consumers another reason why satellite broadcasting doesn’t cut it.”
Dish has been getting hit especially hard given that, on Nov. 1, AT&T pulled its HBO premium channel from Dish customers in a dispute over programming fees.
“It is a strange situation in that DirecTV and Dish are competing fiercely for subscribers, and AT&T now controls both DirecTV and HBO,” Chaplin said. “They can demand a huge price increase [for HBO], as they have, and if Dish pays it, they win big. And if Dish refuses, they still stand to capture many of the subscribers Dish loses.”